What is BOI Reporting?

Effective January 1, 2024, the Corporate Transparency Act (CTA) mandates many businesses must submit beneficial ownership information (BOI) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

This led to the National Small Business Association filing a lawsuit against the Treasury.

Key Takeaways

1. The Court ruled in favor of members of the National Small Business Association (as of March 1, 2024); those entities are not currently required to report BOI to FinCEN.
2. The Court did not issue a nationwide injunction halting the CTA’s enforcement, meaning the CTA remains in effect (for now) as to entities other than the named plaintiffs and NSBA members as of March 1, 2024.
3. Other businesses and plaintiffs may use this ruling to file similar challenges seeking a nationwide injunction of FinCEN’s enforcement of the BOI requirements under the CTA.

Plaintiffs’ Challenge to the CTA

In November 2022, National Small Business United, d/b/a/ the National Small Business Association (“NSBA”), and Isaac Winkles, a major shareholder of an NSBA member (together, the “Plaintiffs”) filed a lawsuit against Treasury, seeking declaratory judgment that the Corporate Transparency Act (CTA) is unconstitutional, and exceeding Congress’ authority under Article I of the Constitution and violating the First, Fourth, Fifth, Ninth, and Tenth Amendments.  Plaintiffs also sought an injunction preventing the U.S. Government from enforcing the CTA against the Plaintiffs.  On March 1, 2024, the Court granted Plaintiffs’ motion for summary judgment.

The Court’s Decision

The Court took an expansive view of states’ rights and a more limited view of Congress’ ability to regulate certain activity out of concern for U.S. national security, and rejected the government’s arguments that the CTA was constitutional under Congress’ abilities to regulate Commerce, regulate foreign affairs, and to impose taxes.  In its ruling, the Court concluded that the “CTA exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.”

In reaching its decision, the Court found that corporations are established by state law, and that the Congressional findings in the CTA expressing concerns over foreign money laundering and necessity of collection of BOI for U.S. national security interests were not sufficient to justify regulation of the domestic activity of incorporation under Congress’ foreign affairs powers.

Conclusion

We have now seen the National Small Business Association win a lawsuit against the Treasury regarding the CTA (which includes BOI reporting). This sheds light that others will move to do the same and we could see this mandatory reporting revoked.

As of now, if you were incorporated before Dec 31, 2023, you have until Dec 31^, 2024 to report. It may be worth it to wait and see how this pans out before filing yourself. If you have incorporated Jan 1, 2024 or after, you have 90 days to report your BOI information.

If you have questions over this topic, contact us today!

Sincerely,

W. E. Stevens, P.C.

Serving our clients with focused intentionality, professionalism, and timeliness